Many researchers believe that minimum wage does not always have an inverse relationship on employment. This report aim is to discuss the negative relationship between minimum wage and employment. The minimum wage can be defined as an active labor market policy instrument, used by governments around the world to set a wage floor. It mostly leads to structural unemployment since minimum wage is sectorial, that is every sector have a different minimum wage from the other i.e. the minimum wage for taxi drivers is 3,218/month while the minimum wage for domestic workers is 2,230/month (Wage Indicator, 2016: 1).
Since economics optimality is obtained after a tradeoff, an increase in minimum wage will lead to an increase in unemployment. This was earlier
Ira Knight, who is an author of article “Let’s Make the Minimum Wage a Living Wage”, expresses an opinion that increasing the minimum wage would help all struggling workers and at the same time improve U.S economy. On the other side, Janice Steele in her article “Keep the Minimum Wage Where It Is” argues that raising the minimum wage would have bad effects on workers, consumers and small businesses. Ira Knight’s article seems to be the stronger of the two positions because her arguments are based on several recent studies, and last but not least, she had a personal experience with the minimum wage job.
During all the history of minimum wages a bunch of studies were made to analyse the effects that the minimum wage changes can bring to employee’s life. In the oldest studies, the institutions that worked on it couldn’t find a significant change on the employees, job searches and employee’s behaviours. The only fact that was noticed was the
One of the most talked about subjects in the U.S economy is the topic of minimum wage. With president Obama’s increase in the minimum wage to 10.10$ per hour people, both economists and politicians alike, have been debating whether raising the bar is a smart idea. At a time when the country the country’s inflation continues to rise at a steady pace and Americans are constantly working to feed their families, some economists know that a raise in the minimum wage would help elevate some of the difficulty. The last time the federal minimum wage was raised was in July of 2009, where rose from 6.55$ to 7.25$. However, there are plenty of reasons as to why the wage should be raised. Some may not think it, but raising the
One source from the Opposing Viewpoints Database called, “Raising Minimum Wage Increases Unemployment” argues against the minimum wage by suggesting it will decrease financial security and cause higher unemployment rates. The author provides unemployment statistics from the 1990s onward as evidence to argue against the minimum wage. The article says, “In 1990, Congress enacted another minimum wage increase.” “The month before the increase took effect, unemployment was 5.2%.” “With the increase, unemployment began to steadily increase and unemployment eventually peaked at 7.8%” (Jaarda). The article emphasizes to readers that increases in minimum wages and following increases in unemployment are not just coincidences by continuingly pointing at similar statistics throughout history.
What we can gather from this is that a minimum wage increase may initially lower employment, but in the long run the
Raising minimum wages is a contestable issue because it is debated in wide and varied audiences. Minimum wage is near the top of economists’ interest; they are looking for the connection between low wages and poor job markets. Each country sets its own laws and regulations regarding wages. For this reason, it has significant importance to policy makers and workers in each of those respective countries. Social activists have also found interest in the topic due to the fact that those who earn a minimum wage tend to come from poor minority families. Furthermore, the average American should have the strongest interest in the conversation because most citizens have been paid a minimum wage at some point in their life. Due to this fact, the idea of a significant federal minimum wage increase in America is open for debate specifically to rejuvenate the job industry, improve living conditions for citizens, and strengthen the economy as a whole.
Figure 7.6 shows how the minimum wage creates a price floor. The difference between the wage rate and the amount of workers needed is unemployment. Figure 7.7 shows the potential loss of labor demanded by businesses. This could become a positive statement to say that raising the minimum wage will increase unemployment. "Recent research reveals that, despite skeptics’ claims, raising the minimum wage does not cause job loss." (Cooper and Hall). An
Raising the minimum wage would establish 85,000 new jobs and would also increase amass household spending by $48 billion the following year (“Should the Federal”). There are no signals shown that a boost in the minimum wage would lower employment. Even though people argue that the authors found “Little or no evidence of negative association
Labor is an important service that must be available and balanced in an ever growing population. For example, there cannot be a larger number of residents than there is labor or else there will be a definite increase in poverty. In the United States, there is a set law of minimum wage, which has an effect on companies and how they manage their labor force. The increase of the minimum wages affects the overall distribution of hours available, therefore, hurting the amount of labor needed. Conversely, minimum wage also has a major effect on those who recetly entered the workforce. If the minimum wage rises, there will be an increase of the unemployment rate. Correspondley, as the unemployed suffer, the first to be affected will be incoming laborers who are looking for jobs and work experience which is essential for their future. However, the upside of increasing minimum wage is that for those employed who keep their jobs they will earn more income which may increase the
The case against raising the minimum wage is straightforward: A higher wage makes it more expensive for firms to hire workers. How big an effect does this have on the job market? Economists debate this. But no one argues that increasing the minimum wage increases the number of unemployed workers who find jobs. In the end, the trade-off is clear. People who keep their jobs get more money; those who lose their jobs, or fail to get new ones, suffer.
Minimum wage jobs are everywhere, and that makes them relatively easy to find. Many Americans work minimum wage jobs; however, these jobs are being overworked by the wrong people. A minimum wage job in the United States has never been, and never will be, meant to provide for a family. Adults who work a minimum wage job and try to raise a family on that income are almost always living in poverty in the United States, but what is poverty? According to Jewel in “Street Life Is No Life for Children”, “Poverty [is] the lack of affordable housing, access to education, and many other resources” (Jewel 428). In recent years, there has been talk in the United States about raising
An increase in the state’s minimum wages will have a dramatic change in the percentage of unemployment within specific areas, mainly the ones that are generally poor and undeveloped. In reality, it is a common sense to understand that this types of changes will take place since, “when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired”(Neumark). The true nature of this idea can be explained by understanding that the less reachable something become, the more competition will be out there to get it, and once you get it you want the best one, which will be the skilled and experienced workers. In this case, all
In this globalization era, as various countries see growth in their economy, there has also been significant differences in the wages set to employees in different countries. The lowest wages set by the law that are fixed to a particular amount which is also defined to be the price floor below which workers shall not sell their labor, has its own effects. The minimum wage law came into force as a matter of social justice amongst the low-wage workers, also to reduce exploitation and see that workers can afford the standard basic living expenses and necessities, not to increase the unemployment rate, indeed to increase the employment rate.
Minimum wage is the lowest payment that workers may legally obtain from employers. Minimum wage has a direct impact on unemployment. Rise of minimum wage would affect low wage workers because it would eliminate some jobs. Several economists have raised their concerns towards the increase of wages because they believe that the business firms would have to reduce labors in order to maintain their expenditures. In the year 2013, President of America, Barrack Obama took initiatives to increase the hourly wage of full-time workers. This idea could not be implemented because many Republican leaders proposed that it could have a direct impact on the employment of workers. There are many arguments that have been carried out by economists and researchers in
I agree with this article, written by Niels Veldhuis, to the extent that minimum wage negatively affects the economy, by increasing unemployment. However, if I were Veldhuis I would have added that the social values of minimum wage may outweigh the negative effects on the economy. This matter is a value judgement, which cannot be proved right or wrong by economics. Veldhuis supports his statement with proof from studies; I will explain these findings with further microeconomic theory. I will discuss the following to reflect upon the accuracy of his arguments: theories of producer behavior and cost minimization, market equilibrium, welfare, and the importance of value judgements.